The Fintech Revolution Is Upon Us

Financial-technology companies, or fintech for short, are expanding traditional banking by altering the customer experience, modernizing products and services, and in many instances, serving as middleman between customers and banks.

This transformation shows no signs of slowing. Here are three ways fintech is reshaping banking:

Data analytics: Fintechs are using data analytics to gain insights into customer behavior and preferences. This data can be used to develop new products and services, as well as to improve customer service.

Payment innovations: Fintechs offer new and faster ways to make payments such as international transfers and integrated financing. Examples include Square, which has made mobile payments commonplace with its innovative smartphone card-swiper technology; Stripe, the provider of the technology behind Apple Pay; and Venmo and Zelle, which allow people to quickly exchange money among bank accounts without having to write checks.

Lending: Some fintechs provide alternative loan options to consumers and businesses that challenge the dominance of traditional banks. In some cases, they do this by relying less on financial statements and tax returns, and more on evaluating patterns of payments.  A recent development is a “buy now, pay later” service that allows for a purchase now in return for small weekly or monthly payments over a short time, with the payments automatically deducted from the consumer’s bank account by the business, bypassing the use of credit cards or personal loans.

However, in nearly all these situations, fintechs work with traditional banks to make their product or service work. This has led to an evolution of the development of  “banking as a service,” or BaaS. Expect to see even more innovation in the fintech space using artificial intelligence and the blockchain technology behind cryptocurrency.